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Tag: $43.7 billion

Fallout Continues on Roche Bid for Genentech

Written by on Monday, August 18th, 2008

Despite Genentech’s rejection of Roche’s $43.7 billion offer last week, coverage of the fallout from the "failed" bid continues as industry observers speculate on Roche’s next move. 

According to a report by the Silicon Valley Business Journal and San Francisco Business Times, Reuters has forecasted that the final purchase price of Genentech will be $53 billion or $107.50 per share.  According to The Pink Sheet Daily, such a high price could prove to be problematic for Roche, who may be forced to make operational cuts as a direct result of the deal.

Speculation is also growing as to whether or not Genentech is going to be able to keep its talent in anticipation of a potential acquisition by Roche.  SF Gate reported that, as anticipated by analysts, there already is a flurry of recruiter activity erupting at Genentech as a result of the initial Roche bid.  The Pink Sheet Daily noted that it will be difficult to retain Genentech’s current talent, as many of the senior-level people will have no financial incentive to stay.   Of course, it goes without saying that the general atmosphere of uncertainty and the anticipated change of culture will likely start driving employees out the doors of Genentech.  However, observers seem to agree that Roche has likely worked the loss of key Genentech employees into the equation in deciding to pursue a bid to acquire the company. 

The Genentech/Roche deal is viewed as just the first of  a new wave of big pharma acquisitions of biotech companies to come in the near future, as pharma companies continue to explore opportunities to replenish their pipelines.  Seeking Alpha explained as follows:

Big Pharma is feeling the need to find new products with blockbuster potential as several important drugs approach the expiration of their patent protection. . .  . Many large pharmaceuticals have lots of cash on their balance sheets, making acquisitions an affordable option. The weaker dollar has also made U.S. companies look more attractive to biotech and pharmaceutical firms abroad. Another major factor is the difficult process of receiving FDA approval. This lengthy and grueling process provides an additional incentive to buy companies that have already received FDA approval on their drugs, ensuring smooth pipeline production going forward.



Potential buyout targets to keep an eye on: Amylin Pharmaceuticals (AMLN), United Therapeutics (UTHR),  Alexion Pharmaceuticals (ALXN), Onyx Pharmaceuticals (ONXX), Vertex Pharmaceuticals (VRTX).

To date, there has been no word on Roche’s next move or when it is likely to take place.  How high will Roche go with the next offer?  The California Biotech Law Blog will keep you posted on any developments.

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Category: Biotech Deals, Biotech Industry News  |  Comments Off on Fallout Continues on Roche Bid for Genentech

Roche Makes $43.7 Billion Bid to Acquire Genentech

Written by on Thursday, July 24th, 2008

The buzz in the biotech world this week has been squarely focused on Roche’s surprising move to launch a $43.7 billion bid to acquire Genentech.

Of course, Roche already owns fifty-six percent (56%) of Genentech, so the acquisition would actually result in Roche owning the remaining forty-four percent (44%) of the company.  The offer would pay Eighty-Nine Dollars ($89.00) per share.

Steve Johnson for the Mercury News reported on the Roche bid as follows:

Although Genentech’s operations would remain in South San Francisco under the deal, it would cease to be a separate company, according to a Roche statement. The proposal will be reviewed by three Genentech board members who aren’t Roche employees, and must be approved by Genentech’s non-Roche shareholders.

If approved, the transaction would create the seventh-biggest drug-making entity in the United States in terms of stock value, according to Roche executives, who noted that Genentech now accounts for about 22 percent of Roche’s revenue.

By eliminating duplication, the combined companies could save up to $850 million a year, Roche executives said. The transaction also could eliminate current trade-secret roadblocks that now hinder their ability to share research data, they said.

According to the Mercury News, the deal is unlikely to close for the current offering price, and Roche may have to offer as much as One Hundred Dollars ($100.00) per share to finalize the deal.

As a member of the Bay Area biotech community, it is hard to envision South San Francisco without Genentech at the helm.   Many of the most successful players in the biotech world got their start at Genentech, and the company has had a very historic role in the growth of the biotech industry, both in the Bay Area and around the world.   That historic role, however, may soon be relegated to a new role in the history books–and we all may have to get used to a world without Genentech as we know it.

What will the entity formerly known as Genentech look like if Roche is successful with the acquisition?

Well, according to The In Vivo Blog, the acquired Genentech is likely to lose its culture, although it may or may not lose the majority of its talent–this will likely depend on whether CEO Art Levinson stays or goes.  For its part, The In Vivo Blog is prediciting that Levinson will make his departure, particularly given the manner in which this bid attempt was handled.  Certainly, there was no effort by Roche to preserve the collaborative spirit that had previously existed between the two companies.

Given this huge loss, will the Genentech acquisition really prove to be a good move for Roche?

Well, perhaps the acquisition will save Roche money.  This seems to be the overriding justification.

The In Vivo Blog reported as follows:

It’s likely Roche took a look at the price of its current Genentech relationship–with its manufacturing transfer prices, up-front fees and royalties, and most importantly no ability to leverage its investment in the US marketplace where the economics of oncology marketing look more and more like primary care–and figured those costs outweighed the innovation it would lose if Genentech’s world class talented departed as a result of a takeover. Just as no primary-care force can afford to sell a single product, Roche can’t afford a US oncology operation selling only Xeloda.

Moreover, Roche is clearly not convinced that Genentech’s productivity would have continued at the rates it has in the last decade. And there are plenty of people who agree. “We all know that Amgen is now a Big Pharma. We talked about it eight years ago. But I think Genentech has now sneaked over that line too,” says the CEO of one of Genentech’s peer Big Biotechs.

The East Bay Business Times agreed with this assessment:

The Basel-based drug maker said it expects to increase research productivity and cut costs by combining operations . . . .

“The transaction will also unlock synergies by leveraging the scale of the combined operations in the U.S. and improving operational efficiency,” said Roche chief executive Severin Schwan.

In the end, however, it seems likely that Roche will end up losing much of what is special about Genentech over the course of the transaction.  However, apparently this is a gamble that Roche is willing to take.

The California Biotech Blog will continue to follow the developments regarding this deal as they come to light.

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Category: Biotech Deals  |  Comments Off on Roche Makes $43.7 Billion Bid to Acquire Genentech

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